Genting still a player in casino war

Malaysian billionaire
KT Lim
slipped quietly into Sydney this week to meet with the state’s gaming regulator. The timing was significant. It is exactly two years since Lim’s Genting Group lodged an application to increase its stake in
Echo Entertainment
beyond 10 per cent.

This is an extraordinarily long time, even in the tightly regulated gaming world.
James Packer
had his application to increase his stake in Echo approved in a year, while it took six months for the Nevada Gaming Commission to grant Genting approval for a resort in Las Vegas. Lim is running out of patience and met with the NSW Independent Liquor and Gaming Authority (ILGA) on Tuesday to try to get to the ­bottom of the delay.

Genting has long been the wild card in the feud between Echo and James Packer’s
Crown
over control of the Sydney casino market. The Asian gaming group has taken a low profile in the past year though and Echo executives and investors have been bemused about why the gaming regulator has taken so long to consider its application.

Lim’s presence in Sydney indicates he is still serious about building a presence in Australia. It also suggests it is not Genting dragging out the approval process by not submitting the required information as some have suggested. Unlike his trip to the country in April last year, the Genting chief executive was not accompanied by his usual entourage. His visit was brief and he flew out on Tuesday night. There were no formal meetings scheduled with Echo.

Genting has enormous gaming interests across Asia and plenty of free cash which would make it an attractive partner for Echo which is seeking to increase the number of Asian VIP gamblers coming to Sydney.

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Some see Echo as potential target

Genting is also a potential acquirer of Echo, either by itself or with a partner. While Packer sold his 10 per cent stake in May last year and has since been given the green light to operate a second casino in Sydney, some investors still see Echo as a potential target.

Some analysts believe Genting no longer has ambitions for Echo because it did not seek to team up with it on Brisbane’s Queen’s Wharf project. Echo announced this week it had partnered with Hong Kong’s Chow Tai Fook and Far East Consortium to bid for the multibillion-dollar Brisbane casino and entertainment precinct.

But that does not necessarily stop Genting buying Echo, which would be the Brisbane project’s operator if it wins the bidding process. The decision by the NSW government to give Packer the go ahead to operate a second casino in Sydney has enhanced, rather than reduced, Genting’s interest in Australia

Crown Resorts competes with Genting in Asia and Packer’s ability to capitalise on the flow of VIP gamers between Australia and Asia is something Lim cannot do at the moment. Genting owns casinos in Malaysia, Singapore, the United States and Britain and has interests in mining and agriculture assets. Lim has presented the company as potentially a significant investor in New South Wales’ tourism infrastructure at a time when mining investment is slowing.

This looks doubtful if Genting runs out of patience and walks away. The regulatory approval process is normal as NSW gaming rules mean any single shareholder must seek permission from the regulator to increase its stake beyond 10 per cent. But the time it is taking to reach a conclusion is ­raising eyebrows.

The ILGA says it continues to work with Genting about its application and the matter remains under consideration.

Shifting the release date of its top Penfolds wine brands is a brave move for
Treasury Wine Estates
as new chief
Mike Clarke
seeks to reboot the business after a shocking ­couple of years.

Penfolds, undoubtedly the jewel in ­Treasury’s crown, has shifted the market release date for its top wines from March and May to October. This is a big mental shift for the company and a change that was resisted by former management.

Clarke says the list of positives outweighs the negatives. It allows Treasury to market its most profitable product better in the run-up to Christmas and abolishes the mad rush to sell product into warehouses before the end of the financial year.

It also allows it to move wine in cooler conditions.

Clarke initially looked at changing the company’s financial year to get around that problem but was asked by his senior ­management team to change the launch dates instead.

This is an important marketing tweak but it does not solve all of Treasury’s problems. The company took a further write-down on Wednesday for assets it paid too much for when it was still owned by Foster’s.

But investors were happy the company was not downgrading earnings guidance after Clarke said he was feeling “pretty ­positive" about financial year 2014 forecasts.

This strengthens its defence slightly against private equity suitor KKR which had its $4.70 offer for the company rebuffed by the board in April.

There are no formal talks going on between the two but investors and the board are said to be open-minded to an offer of $5 or more.

Treasury shares closed up 5 per cent at $5.07 on Wednesday, suggesting investors are confident KKR may up its original approach or another bidder will join the fray.

A break-up still looks inevitable if ­private equity moves in – and there appears to be no shortage of buyers for the US operations.

One of the country’s leading CEOs says when you start in the top job you have a ­six-week period in which to blame your predecessor for all the company’s mistakes. After that, it is time to man up and get things right.

Clarke’s grace period is now up and with Wednesday’s announcement he is making some progress at least with a restructuring plan, although the jury is still out.

Competition regulation is a hot topic at the moment as
Ian Harper
prepares the biggest inquiry into the issue in two decades.

Australian Competition and Consumer Commission chairman
Rod Sims
has made it loud and clear this week he has issues with the upcoming wave of state government ­privatisations. He reiterated his concerns in the ACCC’s submission to the Harper review on Wednesday.

It was no coincidence this coincided with the Australian Competition Tribunal’s ­decision to back
AGL
’s $1.5 billion acquisition of state-owned Macquarie Generation. The ruling is contentious as it overrules the ACCC’s decision in March to block the sale and has huge implications for billions of ­dollars in upcoming asset sale programs.

Working in AGL’s favour was a commitment to supply electricity hedge contracts to smaller retailers which alleviated some of the concerns.

Governments have accused Sims of ­getting too involved in public policy rather than being a regulator but he says he is just doing his job.

The ACCC says its position is based on the fact that the deal means three of NSW’s ­largest generators will be sold to the three largest retailers, reducing competition in the electricity market.

Sims has high hopes for the Harper review and says the emphasis is getting ­competition back on centre stage, as well as stripping out different regulations between the states which are hurting businesses.

Business and Sims will never see eye to eye for obvious reason. Sims says he accepts that companies must pursue the profit motive as long as they do so in accordance with competition laws. But he says the ­existing regulations are deficient and out of step with comparable markets like Britain, the US, Japan and Korea.

Sims is proposing more clout for the ACCC to address the misuse of market power. He wants limitations on the ACCC’s information gathering powers eased as well as the ability to conduct market studies.

The Macquarie Generation decision is a blow for Sims who says he won’t be rushed into making quick decisions around ­potential bidders for state-owned assets without the appropriate access regimes.